Analysis Of The Function Of The P2P Lending Platform As Information Medium: When Comparing To Commercial Banks

Peer to Peer lending(abbreviated as “P2P lending”) is a new financial business model based on big data processing technology in development of internet. It has been very popular for its high efficiency of credit resource allocation since its emergence, all financial transaction activities such as individual credit rating and checking,information exchange and allocation, interest rates negotiation and coordination,contract signing and loans transfer could be completed in P2 P lending platform, it has not only satisfied the demand of some individuals and small and medium enterprises(SMEs) for raising fund more easily and quickly but also provided many investors who prefer higher investment return with more choices for their wealth value added.As a market niche, P2 P lending fills some market gaps such as loans to SMEs and high yield bonds in financial service field.China has seen a significant increase in the turnover of P2 P lending business and rapid development of this industry in recent years. However, due to incomplete and imperfect social credit recording and reporting system in China, the ideology that investors should be responsible for their own investment’s profits and losses has not been commonly accepted by majority of Chinese investors. In order to attract customers, many P2 P lending companies have taken various measures for upgrading their trust such as guarantee investment return to them, etc., and these localized business models have indeed improved their turnovers as well as increased some potential liquidity risk dramatically, which has been proved by bankruptcies of the increasingly more P2 P lending companies in recent years.In this case, "The Guidance for the Promotion of Healthy Development of Internet Finance" was issued by the central bank and other nine ministries jointly on July 18,2015, which clarified that P2 P lending companies are defined as information medium.Their business scopes are strictly confined to information exchange and allocation,credit rating and checking and providing other intermediary service for both lenders and borrowers, trust upgrading is prohibited. Undoubtedly this document will have a deep and far-reaching influence to the operation of most P2 P lending companies and the development of this industry. Under this circumstance, the dissertation will make a comparative study on the difference of business models, information production and risk management between P2 P lending companies and commercial banks by means of some basic knowledge and principles of transaction cost economics, information economics and game theory, the unique advantages of P2 P lending companies as information mediums in optimizing credit resource allocation, reducing transaction cost and information asymmetry, and reinforcing the positive incentive mechanism will be analyzed through some cases studies. It will further discuss how local P2 P lending companies should adjust their market positioning, foster their strength and circumvent weakness under Chinese regulatory framework and current credit circumstance, based on which, it will conclude that the only way out for P2 P lending companies to achieve a healthy, stable and sustainable development is to be focus on its strength on optimization, integration and allocation of various financial information, and providing their customers with more diversified and professionalfinancial information service continually.